893.6363 Manchuria/236
The Ambassador in Japan (Grew) to the Secretary of State
[Received July 27.]
Sir: I have the honor to refer to this Embassy’s despatch No. 1372, dated June 28, 1935,17 and to previous correspondence on the subject of the oil monopoly in “Manchukuo” and the difficulties of American and other foreign oil interests in that connection, and to report the following developments in the situation.
Katakura’s Offer.
In despatch No. 1372 the fact that the firm of Katakura and Company, Ltd., had offered to act as the agent in Manchuria of the Standard-Vacuum Oil Company was mentioned. Since that despatch was written, correspondence between the Mukden and Yokohama offices of the Standard-Vacuum Oil Company has been made available to the Embassy, bringing to light several interesting facts. Mr. Katakura, the proprietor of Katakura and Company, it appears, interviewed both the Ministries of War and Navy in Tokyo before making his proposal to the Standard-Vacuum Oil Company. It would seem, therefore, that his offer, with all its implications, meets with the approval of the military. Mr. Itami, the President of Katakura and Company, Ltd., stated to the Mukden manager of the Standard-Vacuum Oil Company on June 8, 1935, that, with the help of the political influence of Mr. Katakura, arrangements could be made to alter the operation of the Monopoly Law so as to make it in effect an oil control law, under which private companies could compete with success. He said that the name of the law would not be changed, but only the operation. Again on July 1, 1935, Mr. Itami stated to the Mukden office of the Standard-Vacuum Oil Company that he had received a further telegram from Tokyo which encouraged him to believe that a control law could be substituted for the monopoly. Mr. Itami also stated that he would handle the products of the Shell and Texas interests, as well as those of the Standard interests, although he has as yet made no offer to either the Shell or the Texas [Page 921] interests. He stated on June 30, 1935, that his company would sell the products of the three foreign companies under their old brands, that he would make a contract for fifteen years, that his company would not be restricted to a quota in handling monopolized products, and that he expected that the Monopoly Law would be abolished in favor of an oil control law within three years.
After due consideration of the various phases of the situation, and after discussing the matter with the local representatives of the Shell interests, the Japan general office of the Standard-Vacuum Oil Company came to the conclusion that, while the Mukden office of the Company should continue to pursue the conversations with Mr. Itami in order to obtain all the information possible in regard to his proposal and the operation of the Monopoly, no encouragement should be given him that the Company will fall in with his plan. It is the opinion of the Japan general office of the Company that the plan, instead of being formulated in opposition to the Monopoly, as would appear at first glance, is being advanced with the full cognizance of the Monopoly, as it appears that Mr. Katakura consulted with the Ministry of War before making his offer and the Monopoly in Manchuria is to a certain extent under the control of the Japanese Army. It is therefore the opinion of the Company that the possibility exists that the Japanese military are dissatisfied with the operation of the Monopoly, and foreseeing the advisability of some modification, have inspired the Japanese company to make the offer. On the other hand, it is possible that the Monopoly may have been set up as a medium in a plan of ousting the foreign oil companies and supplanting them with Japanese oil companies. In any event, the Japan general office of the Standard-Vacuum Oil Company considers the offer of Katakura and Company to be a carefully-considered plan to accomplish some or all of the following objectives:
- 1.
- To ensure adequate and steady supplies of petroleum products in “Manchukuo.”
- 2.
- To break down the united front of the Standard and Shell interests (this is believed probable because the offer was made only to the Standard interests, although mention was made by Katakura and Company of selling the products of the other foreign companies as well).
- 3.
- To avoid payment by the Monopoly for properties and equipment, which would be taken over, presumably on lease, by Katakura and Company.
- 4.
- To destroy any possible claim for damages due to the destruction of the Company’s good-will in Manchuria (if the Company’s products continued to be marketed under the Company’s brands, there could be no claim for damages based on the destruction of good-will.)
The Japan general office of the Standard-Vacuum Oil Company is able to see little difference between being ousted from Manchuria by [Page 922] the Monopoly and placing their Manchurian business in the hands of a Japanese company, and is inclined to believe that if there is in fact any plan to replace the Monopoly with an oil control law, action in regard to such replacement will be realized sooner if the Company does not agree to any plan such as that proposed by Katakura and Company. Moreover, the local office of the Standard interests feels that, should the Standard-Vacuum Oil Company permit itself to be replaced in Manchuria by a Japanese firm, the action would create a precedent which might encourage similar pressure on the Company in other regions where Japanese political and economic influence is predominant. For these reasons the Japan general office of the Company has recommended to the New York headquarters that the offer of Katakura and Company be declined.
There have been no other developments of importance in regard to the Monopoly during the past two weeks. Negotiations are proceeding in Hsinking between the Manchurian authorities and the local representatives of the Standard and Shell interests in regard to the sale to the Monopoly of the stocks of petroleum products remaining in the hands of the foreign oil companies in Manchuria, but as yet no agreement has been reached in regard to prices.
Respectfully yours,
- Not printed.↩